Comparison of Minorites Shareholders Rights Under Companies Act 1956 and 2013

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Meaning

Those who take interest in shares of companies generally have accepted majority rule. However there are several rights at law that the minority possess to be treated fair and protect rights of individual.

Definitions-

Small Shareholder: A SH who is holding shares of nominal value of rupees 20000 or such other sum as may be prescribed.

Minority Shareholder: Equity holder of a firm who does not have the voting control of the firm, by virtue of his or her below 50% ownership of the firms’ equity capital.

Objective-

The major objective of the policy is to protect the rights of minority Shareholders & keep them updated about the rights from time to time & it also keep a check on SH relationship committee that solves the grievances of the minority holders so as to avoid any discrimination.

Rights of Minority Shareholder-

1 Minority shareholders even enjoy many rights, it includes right to appointment of a director.

2 In decision making and it shall be considered as independent direction, they also have right to apply to tribunal when they find any management conduction disorder which effect any interest of their class.

3 One more important right is in concern with reconstruction and amalgamation; they have given a right to make an offer to majority shareholders to buy the shares of minority shareholders.

Comparison of Companies act 1956 with the new amended act 2013

Democratic decisions are made in accordance with the majority decision and is always considered as fair and justified while it is overshadowing the minority concern. Despite the fact provision have been made in CA 1956 in context to minorities, they have been incapable to take any advantage their fore to protect minorities from being squeezed CA 2013 has been introduced.

It resulted as a game changer in tussle between the minorities and majorities. It basically worked as bridging the gap between two & leads to welfare of minority shareholder.

Minorities’ rights upgraded as:

1 combined provision for relief related to oppression &mismanagement:

Sec 397 & 398 of CA 1956 talks about oppression & mismanagement resp. it grants relief for mismanagement and not for oppression:there for Sec 241 of CA 2013 combines both oppression&mismanagement.

2 It says that according to Sec 245 of CA 2013 not only members but depositors or any class of them may file application before tribunal in any matter.

3 Class Action – It was introduced in CA 2013 which provides class action to be instituted against the company as well as auditors of the Co. It not only empower SH but also depositors.

4 To convert the short coming in context to reconstruction & amalgamation of CA 1956 CA 2013 is introduced.

5 Minorities ungraded – Besides all changes CA 2013 has sought to empower the minority SH in decision making & safeguard the interest of minority SH through appointment of independent directions.

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Conclusions –

Thus looking after both the Acts 1956 & 2013 it may be concluded that the proposed changes are very much useful to the minorities. However it not only requires proper implementation upon current lacunae but also requires winning minorities confidence, however the new acts recommendations is commendable.

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